What the 26 billion dollar LinkedIn exit means


It was the surprise of last week: The US giant Microsoft bought the career network LinkedIn – for more than 26 billion dollars. The technology company paid 196 US dollars per share for the listed company. Thus, the purchase price is nearly 50 percent above the value of LinkedIn’s shares from trading last Friday.

For LinkedIn it is a huge success – especially since Microsoft CEO Satya Nadella has promised the network a high degree of independence. The current CEO Jeff Weiner must stay at the top. To Recode Nadella says LinkedIn will be treated differently than Skype after the takeover, they wanted to “give room to breathe” to the company – taking the Instagram exit by Facebook as an example.

But independence or not the new owner will change LinkedIn and link the network with its products. Under Microsoft LinkedIn now wants to expand to an even greater platform for business contacts and business developments, as Nadella said in a Monday announcement to his staff. Microsoft products such as Office software like Office 365 could also be linked with LinkedIn.

Jeff Weiner also sought to emphasize in a letter that it would “change little” for its employees. At the same time he writes, Microsoft and LinkedIn have now a common mission and lists opportunities for cooperation.

Consequences for Xing

Also for the Hamburg company Xing the acquisition of the much larger competitor is significant. There has already often been speculation about a takeover of Xing by LinkedIn. This is now very unlikely even if Xing with a valuation of around one billion would be a bargain in comparison.

After all, Xing could at least in the short term benefit from the announcement of the acquisition by Microsoft. The shares rose last Monday afternoon from almost 160 Euros to almost 190 Euros. It did not last long at the top but the next day the stock was still significantly higher than the previous price.

Why the rise in Xing stock?

One might think that the acquisition by Microsoft makes LinkedIn so strong that Xing has fewer chances in the competition. After all, Microsoft CEO Satya Nadella campaigned on Monday for the takeover with the words: “Together we can accelerate growth.” One advantage of LinkedIn: The international network is gaining more importance for employees of globally operating companies.

But clearly Xing shareholders see the acquisition as confirmation that career networks have great potential. Particularly in the DACH region, Xing competes bravely with LinkedIn. Unlike, for example StudiVZ and Facebook, Xing did not give in against the Silicon Valley giant.

In the first quarter of this year, Xing was able to increase its sales by 21 percent to 34.3 million Euros. The reason for the growth is the increasing number of customers who pay for premium accounts, said Xing boss Thomas Vollmoeller in May. So there are rosy times for the career network, which was founded by entrepreneur Lars Hinrichs and now majority-owned by the Burda publishing house.

Hold, buy or sell?

The analysts who deal with Xing shares are optimistic. Most of them currently advise to buy Xing shares. Others see it as a safe to keep the stock, but do not recommend a purchase.

Alexander Brown from Research home Montega in Hamburg is one of them: “Fundamentally, in our view, there is no reason to buy the stock. In addition, the competitive pressure by LinkedIn could increase in the future, should their efforts of becoming the market leader in the DACH region intensify with the help of Microsoft.” He also believes a takeover by LinkedIn or Microsoft now to be very unlikely.

A similar belief is held by Sarah Simon, analyst at Hamburger Privatbank Berenberg: “To buy Xing, would make not much difference for Microsoft, it is too small.” Nevertheless, she advises Xing shareholders to hold the stock. “We believe the rating reflects the growth opportunities of Xing pretty well.”

This article was originally published on Gründerszene.

Image: Linkedin